Moody’s ups Ally debt rating

Moody’s Investors Service said it upgraded the senior long-term unsecured rating of Ally Financial Inc. to Ba1 from Ba2. All other long-term ratings of Ally Financial and GMAC Capital Trust I were upgraded one notch. The outlook is stable.

Moody’s said the upgrade of Ally Financial's ratings is based on continuous improvement in the funding profile from sustained growth in deposits and stabilized performance in the auto portfolio.

Ally continues to increase its deposit base at a rapid rate, with deposits growing to $119 billion as of Sept. 30, a year-over-year increase of 18%. As of Sept. 30, deposits comprised 74% of Ally's funding profile, a significant improvement versus the 66% as of year-end 2018 and 62% as of year-end 2017. Along with this improvement, Ally's ratio of market funds as a percentage of tangible banking assets has declined considerably to 23% as of Sept. 30, from 31% as of year-end 2018, Moody’s said.

Ally Financial’s used auto loan portfolio grew to 53% of retail auto originations for 2019. The growth in the used vehicle mix contributed to a trend of higher credit losses from 2015 through 2017. However, over the last two years, auto portfolio net charge-offs have steadied through a combination of underwriting quality, the U.S. economy and stabilized used car values. Ally's automotive finance operations displayed solid pre-tax income growth as a result of this, the agency said.

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